Rosy economic averages bypass many in U.S.
Memphis, Tennessee – — Dozens of FedEx jets queue up for takeoff at the airport here. Beale Street, the heart of the music district, hums with tourists. Yet the empty storefronts in Memphis’ moribund downtown and the cash-advance shops strewn near its highways tell another story.
It’s a tale of two cities, all in one place. And it’s a tale of two Americas: the one that national averages indicate has all but recovered from the Great Recession and the one lost in the statistics.
The pattern is evident in cities and towns across America, from Memphis to Colorado Springs, Colorado, from Wichita to Jacksonville: The national numbers aren’t capturing the experience of many typical people in typical communities.
A key reason is that pay and wealth are flowing disproportionately to the rich, skewing the data used to measure economic health — and producing an economy on paper that most Americans don’t recognize in their own lives. That disconnect has fueled much of the frustration and anxiety that have propelled the insurgent presidential campaigns of Donald Trump and Bernie Sanders.
Again and again, primary voters who were most worried about the economy told pollsters that they had cast their ballots for Trump or Sanders, according to Edison Research, which conducted the surveys on behalf of The Associated Press and television networks.
Trump’s candidacy, in particular, has been driven by support in some of the most economically distressed regions in the country, where jobs have been automated, eliminated, or moved to other states and countries. It’s in these places that the outsider message of an unconventional candidate promising a return to the way things used to be resonates most.
Mike Williams voted for Trump in Tennessee’s March primary, which the billionaire won easily. To many, it would seem that Williams is doing pretty well — he earns $22 an hour as a maintenance worker at an Owens-Corning factory, along with health care and retirement benefits. But his hourly pay has only recently returned to where it was a decade ago, when he worked as a welder.
“I feel like I’m going backward rather than forward,” Williams, 51, said on a recent afternoon after finishing his shift.
One reason he backed Trump, he said, is that he feels less secure than in the past, when more manufacturing work was available.
“I remember when you could quit a job today and go to work somewhere else tomorrow,” Williams said. “There was always someone hiring.”
The depth of that kind of insecurity after seven years of national economic expansion has caught many observers off guard.
“The political reaction to the economy leads me to wonder if we’re looking at the wrong things,” said Carl Tannenbaum, chief economist at Northern Trust and former economist at the Federal Reserve. “The averages certainly don’t tell the whole story.”
Consider incomes for the average U.S. household. They ticked up 0.7 percent from 2008 to 2014, after taking inflation into account. But even that scant increase reflected mainly the rise in income for the richest tenth of households, which pulled up the average. For most others, incomes actually decreased — as much as 6 percent for the bottom 20 percent, at a time when the economy was mostly recovering.
Or consider employment. The U.S. economy has added a healthy average of roughly 200,000 jobs a month since 2011. Yet most have been either high-paying or low-paying positions. By the end of 2015, the nation still had fewer middle-income jobs than it did before the recession, according to the Georgetown University Center on Education and the Workforce.
That reflects what economists call the “hollowing out” of the workforce, as traditional mid-level positions such as office administrators, bookkeepers, and factory assembly-line workers are cut in recessions and never fully recover their previous levels of employment.
Part-time jobs surged in the recession, too, and remained high in the recovery, even while full-time work was slower to return. The number of full-time jobs has risen just 1.3 percent since December 2007, when the recession officially began. Part-time positions are up more than 12 percent.
In Memphis, hiring resumed after the recession and the unemployment rate has dropped to match the national figure of 5 percent. But jobs in low-paying industries, such as retail, restaurants and hotels, are the only category to have fully recovered from the recession, according to Moody’s Analytics. Higher- and middle-paying jobs still trail their pre-recession levels.
In Millington, a Memphis suburb where Trump held a rally in February at a military airfield, residents complain that most of the available jobs are in the fast-food chains that dot Highway 51, the main thoroughfare.
The rebound from the recession has been felt in vastly different ways not only by income levels but across geographic lines. Areas like Las Vegas that still bear deep scars from the housing crisis have lagged behind the nation’s recovery. So have cities like Memphis that need robust consumer spending to fuel growth at the shipping and logistics firms that form the backbone of its economy.
By contrast, cities like Seattle, Denver and Austin, Texas, with heavy concentrations of information technology, management consulting or other highly paid services, have enjoyed a disproportionate share of the job and income growth.
In other words, the richest places in the country are making the economy look better than it actually is, while places like Memphis stagnate.
In the first half of the recovery, jobs grew 5.6 percent nationwide. Yet in the wealthiest one-fifth of zip codes, hiring jumped 11.2 percent, according to the Economic Innovation Group think tank. For the rest of the country, total jobs increased just 3.3 percent.
“It’s hard to find an average city,” Tannenbaum says. “There just aren’t a whole lot right in the middle.”
The same is true for households. These data suggest that the post-World War II trend of a steadily growing middle class, lifted by broader national prosperity, is reversing.
Slightly fewer than half of American adults now fall in the middle-class camp, according to the Pew Research Center, a vast shift. In 1971, 61 percent of households were middle class, according to Pew, which defines middle class as income between two-thirds and double the median household income.
And while home prices have risen nationwide since 2012, they’re still below their boom-era levels in most parts of the country. Since most middle-class wealth is in home equity, those families are poorer than they were before the recession.
By and large, more affluent Americans are the ones who hold stock — and stock prices are back near record heights.
In Las Vegas, which is still recovering from its huge housing boom and bust, Tracy Brigida’s husband, Michael, last summer lost his second job in three years. Tracy, 48, has been paying the bills by substitute-teaching while raising their two children, one of whom is autistic and is home-schooled.
They still owe more on their Las Vegas home than it’s worth, having bought it nine years ago. They hoped it would build wealth for their retirements. Now, it’s a money pit.
The couple initially supported Wisconsin Gov. Scott Walker’s presidential campaign. But after Michael’s latest layoff, they switched to Trump.
Families like hers, she says, seem forgotten in the celebration of rosy national economic averages.
“This administration wants to tell us the economy is better and people are getting jobs,” she said. “But that’s not my experience.”
With higher-paying jobs clustering in wealthier metro areas, business and political leaders in the weaker cities fight to attract and retain employers. Memphis has provided tax breaks to attract or keep 36 companies, including Electrolux, Mitsubishi Electric and Unilever.
Community leaders have also focused on improving the education and skills of the area’s workforce, which trail national averages. A Brookings Institution analysis found that three-quarters of jobs in Memphis require post-high school education or training — something that 40 percent of the area’s adults lack.
Rising automation at many warehouses is also undercutting efforts to create solid middle-income jobs. Memphis is a leading transport hub: In addition to FedEx, shipping firms such as UPS, DHL, and XPO Logistics have warehouses in the region. So do other companies like Nike. Yet Memphis still has 3,200 fewer transportation and warehousing jobs than it did before the recession.
Contributing also to the decline of middle-income positions has been the rising use of temporary workers, whose ranks have surged 54 percent in Memphis since the recession ended while the area’s overall jobs grew just 3.3 percent. City officials involved in workforce training say some of the unemployed have 25 years of work history — all of it through temp firms.
Chris Rice, 29, has worked steadily in the Memphis region for the past 10 years, all at temporary jobs. Rice most recently worked as a forklift driver for Electrolux and for CEVA Logistics, a privately held warehouse and distribution firm.
The CEVA job ended after the company lost a contract to distribute Microsoft’s X-Box, Rice said during a job fair at a community center in Bartlett, a Memphis suburb.
Rice said he was hopeful of getting a new temp job at an assembly plant owned by printer manufacturer Brother International. He was the only forklift driver at the job fair.
Still, “I’d love to have a permanent job,” he said. “I’m tired of going from temp agency to temp agency when there’s no work.”
Contributing to this report were AP staff writers Nicholas Riccardi in Las Vegas and Adrian Sainz in Memphis.